Importers and the Trade Reconciliation and Trade Enforcement Act of 2015

May 31, 2016

by Felix Pekar

On February 24, 2016, the Trade Reconciliation and Trade Enforcement Act of 2015 (TRTEA) became law. TRTEA addresses many areas of interest to importers. Some of the more important provisions include stronger prohibitions against dumping goods to evade duties, expanded rules allowing substitution drawback of duties, and a longer time period in which to file drawback claims. Other key aspects address intellectual property and enforcement of Antidumping and Countervailing Duties.

Importers will see major changes to U.S. Customs and Border Protection’s (CBP’s) duty drawback program, hopefully making it more profitable for many companies. Beyond removing some of the complexities and burdensome requirements, TRTEA will allow matching of imports of one product with exports of the “same kind and quality” product, rather than requiring use of the same 8-digit Harmonized Tariff Schedule (HTS) subheading. TRTEA also will extend the time period during which import and export of the matched products occurred to 5 years.

Notably, TRTEA does not address the North American Free Trade Agreement (NAFTA) drawback rule commonly known as the “lesser of the two.” So, importers of goods from Canada and Mexico are largely unaffected, as many, but not all, goods manufactured in Canada and Mexico are already eligible for duty-free treatment or reduced duty rates under NAFTA. Here, importers provide CBP a Certificate of Origin and/or display a country of origin marking on the goods. Thus, the “lesser of the two” rule is not usually a major factor at play in import duty drawbacks.

Phase-in of the new drawback rules will occur over a two-year period due partially to the need for new CBP regulations to implement TRTEA. Claims can be filed under the new rules starting in February 2018. To take full advantage of the matching rule and the retroactive provision, importers that regularly claim drawbacks should start evaluating what products coincide best with the new schema now. Remember, starting in 2018, goods imported as far back as 2013 will be eligible for the substitution method.

In what can be considered good news for U.S. consumers and importers, TRTEA also increases the duty-free threshold from $200 to $800 and simplifies recordkeeping.